Jayk, we're trying to help you here. Run away! Why would you take on this woman's baggage and kids when you're literally in the prime of your life? She is controlling you with sex and lies and you just can't see it. Stop having sex with her and then maybe you will be able to see what is really going on.
Were you raised mostly by your mother? I ask because this is very common in the J-dubs. Men who are raised by their mothers almost always turn out to be nice guys that women like this control and walk all over.